Last year, Michonski confirmed his hunch. Through a phone system, of all things.
The busy Coldwell Banker franchise, which sells about $1 billion worth of pricey real estate a year, installed a voice over IP (VoIP) phone system. Its IT director, Eric Bassa, with help from vendor M5 Networks Inc., developed an application that tracks inquiries from every ad. The firm use a different phone number on each ad, and because calls come in as converted IP data packets, software can tap into them.
"This is giving us the ability to really gauge how effective we are in a way we've never been able to," says Michonski, who expects to shift ad spending to the Internet now that he has hard data showing that buyers respond better to online ads. "This has always been a dream of mine."
Welcome to the age of Internet telephony, where businesses like the Coldwell Banker brokerage are discovering all kinds of functionality never available with phones before. In a January survey of 1,500 midsized businesses by London, Ontario-based Info-Tech Research Group, 23% said they were using VoIP. That number should rise to 50% by 2008, and by 2015, pretty much everyone will be using it, the firm says.
Yet while a host of benefits await -- cost savings, efficiencies, applications that can be tied into the system -- make no mistake: This is a vendor-driven upgrade. Leading telephony vendors have all but discontinued their traditional time division multiplexing (TDM) private branch exchanges (PBX), opting instead to make all of their products IP-enabled. That means that a business can move to an all-IP system at once, or phase it in slowly -- but once its old PBXs wear out, there's no choice but to enter the next generation.
"We talked to five vendors and everyone was pushing VoIP," says Dave Thompson, vice president of IT at Muzak LLC, the $218 million, Fort Mill, S.C.-based provider of audio for stores and restaurants.
The decision today, then, is not whether to choose VoIP but when to make the leap and how to best use the technology. There are options. Some vendors, including telco carriers such as Sprint Corp., offer hosted systems that allow businesses to take advantage of many of the benefits without having to manage the system themselves. At Avaya Inc., "Nearly every system we sell is IP-ready out of the box," says Jorge Blanco, vice president of strategic marketing at the Basking Ridge, N.J.-based firm. "I'm hard pressed to think of any leading vendor that does not offer IP as a standard capability."
The business value of these systems continues to be a moving target. Vendors often tout a Jetsons-style vision of a fully converged business where voice becomes integrated with everything from instant messaging to Word documents visible on a screen smaller than the size of a PDA. But the technology and standards still have a ways to go, and many midsized businesses just want VoIP telephones that work reliably well. On the upside, some businesses tout concrete cost savings, and others, like the Coldwell Banker franchise, unearth solutions to nagging business problems.
The New Reality
When VoIP first emerged in the late 1990s, people envisioned telephone calls coursing through the free Internet like data. Of course, that's not how it panned out. VoIP calls move only across a business' local- and wide-area networks as free data packets. When a person makes a call to someone outside the network, it is routed across the public switched telephone network, and phone bills arrive in the office. This reality was among the many factors that made the pull to VoIP wane. But the push factor was just getting started.
That push begins either when a business' old PBXs no longer do the job or when a company builds new facilities, says Irwin Lazar, a senior analyst with Midvale, Utah-based consultancy Burton Group. In new space, laying data cable serves both computers and phones when you have VoIP.
When Mountain View, Calif.-based law firm Fenwick & West LLP moved offices in 2002, it had to upgrade. "We had a traditional switch that was literally held together with duct tape and was cooled by an old Kenmore window air conditioner," says Matt Kesner, CTO of the $142 million firm.
Others have found that traditional systems don't scale well. Glorybee Natural Sweeteners Inc., a $9 million Eugene, Ore.-based honey refiner and packager, had a traditional phone system that could handle only 12 simultaneous calls. So when the company grew from 50 to nearly 100 employees, the system became chronically overloaded and customers were met with a busy signal when they called.
And some have simply tired of the headaches involved in managing large and complex traditional voice systems. Muzak has 50 offices spread across the U.S. and 46 separate phone systems, nearly all with their own receptionist. The company worked with multiple service providers. Getting even basic things accomplished like adding a new employee could take days. "Imagine the nightmare of managing all of these platforms," says Muzak's Thompson, who switched to VoIP.
There were also dollar savings.
Since installing a VoIP system in July 2002, Muzak has reduced the number of phone receptionists from 40 to a handful at the main office. VoIP allowed Thompson to centralize the entire system, discarding 35 maintenance contracts for PBXs that cost $2,500 each over two years, or almost $90,000. The entire VoIP system -- IP PBX, IP gateway to convert calls as they go out over traditional phone lines and phones -- cost between $200,000 and $300,000. "When I ran this past my CFO, it was like a light bulb went off," says Thompson.
A conference calling feature included in VoIP systems has also emerged as a major money saver for some. Privately held Amerindo Investment Advisors Inc., a New York-based investment firm, installed its VoIP system in February of 2003. At the time, it was spending $4,000 a month on conference calls -- money that now doesn't leave its pocket.
This was first published in June 2005